How To Improve the Ecommerce Order Fulfillment Process: KPIs, Strategies & Top Tools
Ecommerce Owner Woes: Dealing with DMs about order delays is common and often frustrating, even when customers are polite.
Customer Anxiety Parade: Customers are eager for their purchases and get anxious when there's a delay, eager for that dopamine hit from receiving their order.
Not-so-Sexy Shipping: Improving order fulfillment might not be exciting, but it's essential for ensuring a smooth and satisfying customer experience.
Glamour Starts Behind The Scenes: Optimizing less visible operations allows businesses to focus more on the appealing and glamorous aspects.
As an ecommerce business owner myself, I can tell you that one of my least favorite DMs is “Hey, it's been five days. Do you know where my order is?”
They're being polite. But what they really mean is—“I know you're not really in charge of the shipping yourself, but hurry it up, will you? The money's gone from my bank account and the dopamine hit is fast fading.”
I know. When you want to talk business, how to improve order fulfillment processes isn't the sexiest topic.
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But it's only when you optimize your invisible operations that can you focus on the glitz and glamour.
If you can't fulfill your promises to your customers—repeatedly, scalably, and consistently—you will drive even the most loyal buyer to a competitor.
So, how can you make good on your promises while keeping your bottom line in check? Here, we'll go through the seven steps in the order fulfillment process, key metrics you should track, and strategies to streamline operations.
Let’s roll.
What is the Order Fulfillment Process?
The ecommerce order fulfillment process is the journey your customer's order takes, from an online order to a delivered package.
From the moment they click “Buy Now” to when their order arrives, fulfillment covers every step of the order experience, including any potential returns.
There are four major types of order fulfillment models:
- In-house fulfillment. You're in charge of everything, from storing inventory to packing and shipping. For example, this model works for my business because we have limited order volumes and need complete control over the customer experience.
- Outsourcing fulfillment. This is the “let the pros handle it” model. Third-party logistics providers (3PL) handle everything from inventory storage to order shipping and returns.
- Dropshipping. While your website lists products, there’s no inventory on hand. A third-party supplier ships the item directly to the customer when they place an order. An “inventory-free model,” dropshipping works well to lower or eliminate storage costs.
- Hybrid fulfillment. Pick and choose from the other fulfillment models to create the perfect solution for your business. This approach is all about flexibility.
The right fulfillment model for you must align with your business needs—handling your specific order volumes, customer places, and sales channels smoothly.
When your products involve customizations or are made-to-order, the fulfillment process must accommodate this complexity without introducing delays.
What are the 7 steps of order fulfillment?
I’ll walk you through the steps we take for efficient order fulfillment processing for our thrift shop on Instagram.
Let’s take a peek into the high-level processes involved:
1. Receiving inventory
In our context, we don’t actively source inventory unless we need specific trendy products, usually during the winter.
My “shipments” are largely (large) bags and boxes of pre-loved clothes and accessories waiting to be sorted, priced, and uploaded to our shop.
2. Inventory storage
You need to store your products efficiently and accessibly—in other words, invest in effective warehousing.
My warehouse was—and is—my living room. We’ve made it work so far, but it’s far from ideal.
3. Order processing
My mother sold my grandmother’s pearls to an excited customer recently.
We answered her questions, relayed the price, and verified the receipt of the payment by asking for a screenshot on Instagram.
Here, we also asked for her shipping details because as our operations have downsized, we’ve brought delivery in-house.
4. Order picking and packing
My mother then carefully dislodged the pearls from their storage space in a dedicated jewelry drawer and packed them in a painted cardboard box.
For a personal touch, I placed a handwritten note in calligraphy in the packet.
We only use sustainable packing materials for our deliveries, and even reuse bubble wrap to protect precious, fragile items.
5. Shipping
For customer orders over INR5K, we often include free shipping for a better customer experience.
Luckily, we’ve partnered with a delivery guy who gives us a good offer on multiple shipments through a local company. We prioritize customer communication both, before and after shipping orders.
Once the order is shipped, we then send the customer a screenshot of the order tracking details receipt so they can track their order in real time.
6. Delivery
The moment of truth! Our customer loved the pearls. A smooth delivery experience contributes to overall customer satisfaction.
7. Returns management
Returns are a part of any ecommerce business.
Having a clear return policy and a well-organized process is important. In this case, we didn’t need to handle a return—rather, we got a positive review!
Nonetheless, we have a return policy on our page:
Why optimize order fulfillment?
Remember that DM I mentioned earlier? The one that gently asks, “Hey, it's been five days…” That's the sound of a customer's patience wearing thin.
The cold, hard truth about customer expectations is that when they think “fast delivery,” they often mean the same day. 96% of customers, in fact.
This is the “Amazon Effect.”
Amazon launched its unlimited next-day delivery membership back in 2007.
They declared that “fast delivery should be an everyday experience—rather than an occasional indulgence.” And since then, ecommerce hasn’t quite been the same. They’ve made speed and convenience non-negotiable.
So then, what are the consequences of poor order management?
Broken records: Qrates' fulfillment failure
Qrates, a promising platform meant to empower artists with on-demand vinyl sales, has become a cautionary tale.
The company, founded by Taishi Fukuyama in Tokyo, essentially vanished, leaving countless customers and artists in the lurch.
In July 2023, Qrates' facade began to crack when they reported a cybersecurity incident with their shipping company.
After initially telling customers this wouldn't affect shipping, it turned out to be an entirely different story. Artist Brittany Ann Tranbuagh's experience is proof of the growing anger.
Predictably, there’s been a mass exodus of users and serious reputational damage to the company.
On the other hand, optimizing your order fulfillment process:
- Reduces cart abandonment. The top reasons for cart abandonment are all related to shipping and delivery concerns: orders not arriving on time (27.44%), delivery time being too slow (18.66%), and unclear delivery dates (12.44%).
- Builds customer loyalty. When you deliver quickly and consistently, you create happy customers who are more likely to come back for more. 54% of consumers say who they shop with is based on timely delivery.
- Boost profitability. Fast and reliable shipping can be a major differentiator in the crowded ecommerce market. A fast fulfillment process can actually increase your bottom line. Same-day delivery has increased revenues for more than 80% of businesses, with some experiencing growth of over 10%.
While we may not all be as agile as Amazon, streamlining your fulfillment process will lead to happier customers and a more successful business.
7 Order Fulfillment KPIs to Track
When you track key metrics throughout the order fulfillment process, you can turn those gut feelings about “how things are going” into hard numbers.
The right KPIs for your ecommerce business will depend on factors like your size, complexity, and overall goals.
Let’s look at some of the most common ones:
1. Order accuracy: When customers receive exactly what they ordered, both in quantity and condition, that’s order accuracy. This metric is a big KPI that directly influences both customer satisfaction and your business's profitability.
2. Fulfillment time: Also known as order fulfillment cycle time (OFCT), it's the ticking clock from “order placed” to “package received”—a major factor in customer happiness and a key indicator of how smoothly your warehouse operations are running.
3. Shipping time: This refers to how long it takes for the package to reach the customer from when it is handed over to the carrier. This includes your handling time (packing and shipping the order) as well as the carrier's transit time (getting it there).
4. Inventory turnover ratio: The rate at which your stock sells and is replenished. A high turnover signals brisk sales and fresh inventory, whereas a low turnover alerts the need to reassess.
5. Order fulfillment cost: This KPI measures everything from receiving and storing inventory to packing, shipping costs, and handling a single order. Your fulfillment process gets a financial health check, revealing how much every sale actually costs you.
6. Customer satisfaction score (CSAT): This is a measure of how satisfied your clients are with their overall shopping experience, from browsing your site to receiving their purchase.
7. Return rate: The return rate is the percentage of products that make a U-turn back to your shop after being sold. The metric can be hard to swallow, as returns processing can mean extra work, potential lost sales, and sometimes even damaged products.
The return rate is especially high for digital storefronts—often double that of brick-and-mortar stores. Ecommerce returns averaged 17.6% in 2023. In other words, nearly 18 products out of 100 are returned.
This is reason enough to proactively monitor inefficiencies in your order fulfillment process and gear for optimization.
9 Expert-Backed Order Fulfillment Strategies
Before we dive in, think of improving your order fulfillment process as an extension of your overall brand experience.
Because “fulfillment isn’t just logistics,” according to Jordan Adair, CEO of ShirtMax.
Jordan treats the process as a marketing touchpoint by ”adding personalized touches to packaging or follow-up messages about customer orders.”
This has increased repeat purchases and customer loyalty for his business more than speed improvements alone.
Now, let’s get down to brass tacks.
1. Set up real-time software integrations
Of the 41 ecommerce business experts who responded to my query for this article, an overwhelming majority—35—mentioned real-time software integrations as one of their key order fulfillment strategies.
So, I sunk my teeth into their responses. Let’s hear from the horses’ mouths on why real-time data reigns supreme:
Reducing manual errors
Automating inventory management and fulfillment using real-time software like Lightspeed has reduced errors and sped up our processing by about 20%
Optimizing lead times
We’ve focused on optimizing our lead time by integrating real-time software that seamlessly updates inventory and tracks orders. This strategy reduced our lead time by 20%, significantly enhancing customer satisfaction.
My top tip for other ecommerce businesses is to invest in real-time tracking software.
It streamlines operations and provides transparency that builds trust with your customers.
Efficient inventory management
A tried-and-true strategy we’ve implemented is real-time inventory management software.
This tool syncs our stock across all sales channels, avoiding overselling and backorders.
Since adopting this system, our fulfillment accuracy has improved, boosting customer satisfaction significantly.
We also integrate automated picking and packing processes, reducing human error and speeding up the overall operation.
My top tip for improving order fulfillment? Invest in real-time tracking software.
Sync your inventory, avoid stockouts, and exceed customer expectations. Shopping around for a reliable inventory management system?
Here are our top 10 picks:
Increasing order accuracy
Real-time tracking software has consistently brought our order accuracy rates to above 98%, a substantial increase from when we first started.
For other ecommerce businesses, the top tip is to integrate real-time software into your order fulfillment process.
Boosting fulfillment speed
A successful strategy has been implementing automated inventory management, which has increased our fulfillment speed by 30%.
My top tip is to invest in real-time tracking software to provide customers with accurate delivery updates.
This approach has led to higher customer satisfaction and fewer order-related issues.
Improving inventory level visibility
Real-time inventory management software allows us to monitor stock levels and order status continuously.
It helps in anticipating demand and avoiding stockouts or overstock situations.
Since using this system, our average fulfillment time has improved by 20%, and customer complaints related to delayed shipments have dropped significantly.
Better order processing times
One strategy that has consistently proven effective in optimizing order fulfillment processes is implementing a robust warehouse management system (WMS) integrated with real-time inventory tracking software.
This approach has typically resulted in an improvement in order accuracy and processing times.
Tired of manual processes and costly errors? A warehouse management system can help. Here are our top 10 picks:
Prevent stockouts
Invest in an integrated order management system (OMS) that ties together your ecommerce platform, inventory database, and shipping partners.
This integration ensures that inventory levels are automatically updated with each order, reducing the likelihood of overselling products and speeding up the fulfillment process.
Just like David, you too, can avoid overselling. Check out our list of the top 10 best order management systems:
2. Try batch picking
A traditional pick-by-one method is time-consuming and leads to unnecessary movement across the warehouse floor.
Enter: batch picking. Instead of having your team pick items for each order individually, they grab items for multiple orders at once.
Ashley Smith, owner of Batana Babe, a company dedicated to sourcing and retailing 100% pure Batana Oil from Honduras, attests to the power of efficient picking.
We've decreased the fulfillment time by 20%. We saw fewer late deliveries and a rise in repeat customers.
3. Automate workflows
An automated order fulfillment system optimizes the fulfillment process of ecommerce customer orders by automating key steps such as receiving, sorting, storing, picking, packing, and shipping.
The long-term impact? Significant cost savings through streamlined operations and reduced manual labor.
But don’t just take our word for it.
Sergey Taver, marketing manager of Precision Watches, shares his experience with automation:
We automated important processes in our workflow by integrating ShipStation, including packaging, label generation, and tracking.
And the result?
This has lowered our order processing time by 40%, allowing us to ship 94% of our online orders within 24 hours.
The increase in speed and reliability not only reduced cart abandonment but also encouraged repeat purchases, improving overall sales.
4. Offer flexible customer fulfillment options
The rising popularity of options like BOPIS (Buy Online, Pick Up In-Store) and curbside pickup, used by over a third (33.33%) and nearly a third (30.4%) of consumers respectively in the past six months, is evidence of a growing desire for flexible fulfillment options.
Michael Nemeroff's success with RushOrderTees further validates this trend.
His company delivers 92% of orders on time by offering options like expedited shipping and in-store pickup.
Why does this work, though? You’d think that customers would want packages delivered to their doorstep so they don’t have to change out of their bathrobes. (I know I do.)
However, the deciding factor is choice.
“Giving customers the ability to choose how they want their orders delivered or picked up helps me manage delivery time variance more effectively.
Customers appreciate having control over their delivery times, and this flexibility has improved their satisfaction.”
5. Partner with multiple shipping carriers
Aruna Chawla launched a vegan condom company in India at 26 in 2021. In her words, she “failed HARD” at making it a viable business despite initial success.
She’s a dear friend and a 2x femtech founder—so I reached out to her privately and asked:
If you were to do it all over again, how would you improve order fulfillment?
I’d build a strong logistics network. Establish partnerships with multiple carriers and fulfillment centers to ensure flexibility and reliability as the business scales.
Why?
Our most common challenge was shipping delays. Unpredictable factors like weather or carrier issues impact delivery times.
Plus, as orders grow, scaling fulfillment processes without compromising quality can be daunting.
In addition to reducing costs, improving delivery flexibility, and mitigating risks, partnering with multiple shipping carriers optimizes supply chain management.
Third-party logistic providers (3PLs) often have relationships with a variety of carriers, granting you access to their networks and potentially negotiating lower rates.
A 3PL acts as an intermediary, helping you manage relationships and select the right carrier for each shipment.
If you’re new to this, check out our list of the top 10 3PLs:
6. Optimize your warehouse layout and slotting strategy
An optimized warehouse design streamlines the flow of goods, equipment, and personnel, minimizing stock losses and maximizing efficiency.
The key is tailoring the design to your specific products and expected volumes.
“We've found that optimizing our warehouse layout and using barcode scanners has increased efficiency,” says Eric Koenig, art director at Twigs Paper.
Their KPIs speak to the effectiveness of this order fulfillment strategy: order accuracy is currently at 99.8%, on-time shipping at 97%, and customer satisfaction? 4.8/5 stars.
A WMS offers valuable information to optimize warehouse design. In addition to data, it simplifies layout optimization in a way manual methods cannot.
On the other hand, slotting optimization is the strategic organization of inventory within a distribution center, aimed at maximizing fulfillment efficiency.
High-demand SKUs need to be readily accessible through meticulous planning and management.
In addition to streamlining pick paths and reducing congestion, this also speeds up order fulfillment.
7. Prioritize transparent customer communication
The traditional fear of scaring off customers has kept retailers from revealing low stock levels.
But, according to Boston College's Dmitry Mitrofanov, that strategy might be backfiring. When orders go unfulfilled due to stockouts, it's not just a one-time inconvenience for customers—it can seriously damage their trust and loyalty.
Turns out, honesty is the best policy—even when it comes to low inventory.
According to new research, retailers can actually benefit from informing shoppers when a product is running low.
Mitrofanov highlighted that psychology research reveals an interesting phenomenon: perceived scarcity can actually drive customer purchases, potentially even in larger quantities, due to “scarcity” or “herding” effects.
8. Explore micro-fulfillment centers (MFCs)
In ecommerce, MFCs support faster, more cost-effective deliveries by storing inventory closer to customers.
Most of these centers are heavily automated, so they're extremely efficient.
These centers are typically under 10,000 square feet, and strategically located within existing stores or warehouses. For rapid order fulfillment, they maintain a limited inventory (24–48 hours' worth) and prioritize quick restocking.
Leading retailers such as Walmart, Kroger, and Jewel-Osco have adopted micro-fulfillment as a key strategy to expand their supply chains, reach a broader customer base, and streamline their fulfillment process.
This, in turn, drives increased sales and strengthens their market position.
9. Continuously improve forecasting with data analytics
A key benefit of leveraging real-time data analytics is to meet customer demand without overstocking or facing stockouts.
How?
Josh Qian, COO and co-founder of Best Online Cabinets says:
“We’ve been using data analytics to forecast demand more accurately, allowing us to adjust inventory levels proactively.”
Final Thoughts
There you have it—nine proven strategies to improve your order fulfillment process.
We've covered everything from real-time inventory tracking to micro-fulfillment centers, but all strategies boil down to one thing: using technology to meet high customer expectations.
And the common thread? Solid software.
When it comes to automating workflows, optimizing warehouse layouts, or crunching numbers for demand forecasting, the right tools are the name of the game.
So, take a hard look at your fulfillment process. Where can software fill the gaps? Because the best ecommerce businesses aren't just selling products, they're selling experiences.
If you want to hear AI podcasters discuss this post—it's strangely compelling—here you go:
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Order Fulfillment Process FAQs
Got more questions? Good. We have the answers!
What are the latest trends in order fulfillment?
Robots. For example, Oriflame has partnered with UK-based Active Ants to use their robotics-driven fulfillment capabilities.
Robots will handle most of Oriflame’s order picking and packing (85%), resulting in a 50% increase in speed and accuracy.
How can I reduce errors in my order fulfillment process?
Here’s a quick snapshot:
- Leverage technology like a WMS, barcode scanners, and RFIDs.
- Streamline warehouse layout and optimize inventory placement.
- Train staff well and foster a culture of accuracy.
- Regularly review and improve processes using data insights.
